Australian biotechnology company Eqitex (EQX) rose by as much as 67% today after it announced that it has finalised its move into the resources sector via the purchase of interests in three mineral permits in Indonesia.
The permits are for coal mines based in East Kalimantan, located in the Regency of Penajam Paser Utara.
Eqitex has entered into an agreement with PT Mega Coal Indo Mine, the owner of the mines, to acquire the rights to 70% of the net profits generated from coal production from the three permits.
The biotechnology company will be paying a deposit of $US2 million to Mega Coal within the next two weeks, but this is refundable if Eqitex is unable to prove up reserves of at least 20 million tonnes of coal on the three permits during its due diligence.
The decision to move to the resources sector came after Eqitex realised it needed to change its direction to sustain profitability.
Eqitex has focused on the biotechnology sector for the past five years with interests in the areas of chronic diseases and age-related conditions.
The company's two main programs are the ZingoTX project to develop pharmacologically active compounds for pain management, and the VacTX project to develop a treatment for infectious diseases, cancer, allergies and autoimmune diseases.
"Despite the best efforts of past Board and Management teams, neither project proved to be a company maker," said Eqitex in a statement.
"In August 2006 there was a major restructure of the Company and a deliberate effort to reduce the company's burn rate as well as to focus on finding larger partners to develop the two projects to their next commercial level."
The company said that while the search for partners has "shown some positive signs", it became clear to the Board that a new direction needed to be taken to build shareholder value in Eqitex.
"After reviewing a number of opportunities, the Board has decided to invest further time and funds in carrying out due diligence on what has the potential to be a significant coal project in Indonesia."
"The Directors believe that the proposed change of direction to focus of the resources sector, the appointment of senior management with significant experience in this sector and entering into the agreement to earn an interest in these mining permits will provide the Company and its shareholders with
significant potential upside."
Furthermore, Eqitex said that while it has not yet been able to develop either VacTX or ZingoTX to a commercial level, There still remains the possibility that these projects may ultimately generate some commercial value.
"The existing Board has been in dialogue with a number of national and international companies that have been interested in investing in one or both projects and taking on the day to day management role required to develop the projects further."
Eqitex said it is currently in discussions with one party regarding a potential investment in VacTX as well as another international organisation with regards a potential investment in ZingoTX.
Over 3 million Eqitex shares changed hands today, more than four times the average daily volume.
The stock rose by 8.5 cents to close up at 28 cents.
